Double Tax Deduction on Transaction Costs: A Detailed Guide

The Double Tax Deduction (DTD) on transaction costs is a valuable incentive for companies engaging in mergers and acquisitions (M&A). Apexia Corporate Advisory is here to guide you through the eligibility criteria and claims process to maximize your tax benefits.

What is the Double Tax Deduction on Transaction Costs?

The Double Tax Deduction (DTD) allows companies to claim a 200% tax deduction on qualifying transaction costs incurred for M&A activities. This incentive aims to support companies in undertaking strategic acquisitions to grow and remain competitive.

Eligibility Criteria

To qualify for the DTD on transaction costs, companies must meet the following conditions:

• The acquiring company must be incorporated and tax resident in Singapore.
• The acquisition must result in the acquiring company owning at least 20% of the ordinary shares of the target company.
• The target company must be carrying on a trade or business.
• The transaction must be completed between 1 April 2010 and 31 December 2025.

Qualifying Transaction Costs

The DTD applies to specific transaction costs directly incurred in the M&A process, such as:

• Legal fees
• Accounting fees
• Valuation fees
• Due diligence costs

It is important to note that the DTD does not apply to the purchase consideration for the shares acquired.

Tax Deduction Rates

Under the DTD scheme, companies can claim a tax deduction of 200% on the first SGD 100,000 of qualifying transaction costs incurred per YA. This enhanced deduction provides significant tax savings for companies engaging in M&A activities.

Documentation Requirements

To support your DTD claim, you must maintain accurate records and provide the following documents:

• Transaction agreements and contracts
• Invoices and payment receipts for transaction costs
• Proof of ownership of shares post-acquisition
• Details of the target company's trade or business

How Apexia Corporate Advisory Can Help

At Apexia, we specialize in helping companies leverage tax incentives like the Double Tax Deduction on transaction costs. Our services include:

• Evaluating your M&A activities for DTD eligibility
• Preparing and submitting accurate claims to IRAS
• Ensuring compliance with all documentation requirements
• Providing guidance on tax planning and strategy

With Apexia's expertise, your business can maximize tax savings while ensuring compliance with Singapore's tax regulations.